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The cash advance loan industry has been prosperous during the past 10 years, as an increasing number of states have either loosened their banking restrictions or looked the other way while these companies moved in. While the nation, in general, already has more payday loan and check cashing stores than McDonald’s and Burger King restaurants combined, South Dakota has more cash loan stores per capita than all but one other state. The sparsely populated home of the Black Hills has more than 300 such stores; that’s one for every 2500 inhabitants. If California had as many per capita, it would have 12,000 such locations.

But California does not. Why is South Dakota a haven for these expensive lenders?

Loose financial laws, for one thing. South Dakota has few residents, but the politicians within the state decided years ago to attract out of state business by loosening the state’s banking regulations. As a matter of fact, the state no longer has any laws at all regarding rates of interest. Loan providers doing business within the state may charge whatever interest rates they like.

Along with that is the implication that any business based within the state can do business somewhere else under that state’s laws. So, banks, bank card institutions and quick cash loan institutions have flocked to South Dakota to profit. And while those businesses have done well within the state, they have done particularly well elsewhere, while lending money in other states at South Dakota interest rates. By doing so, they have managed to circumvent the lending laws of other states that do not permit high interest quick cash lending.

Of course, the plethora of such stores in South Dakota suggests that there is a need for such business within the state, as well. Sioux Falls has more than 40 payday loan stores, a surprising number for a comparatively small town. Then again, the state is mostly rural, has relatively little business short of banking and agriculture, and consequently has a population base that earns relatively low wages.

And where there are minimal wages, you’ll find cash advance loan stores as well as people who need short term cash loans. These businesses do particularly well in neighborhoods where individuals live paycheck to paycheck and need occasional aid to tide them over until payday. The fact that they may have to pay 400% or more to borrow such sums for fourteen days seems not to bother the borrowers much, otherwise we’d be writing about all the payday loan stores that are closing there.

And the sensation isn’t unique to South Dakota. Other states which have eased restirctions on their banking laws, such as Utah, have found that when the banks move in to do business out of state, the payday loan stores move in to do business in state. It’s just part of the price that politicians pay when they market their states out to those who wish to lend cash at high interest.